Monty Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction...

 

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Monty Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2026. For tax purposes, the company employs the cost-recovery method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from 2025 2026 (a) Percentage-of-Completion Cost-Recovery Difference $822,000 $542,000 $280,000 750,000 497,000 253,000 (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit Monty Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2026. For tax purposes, the company employs the cost-recovery method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from 2025 2026 (a) Percentage-of-Completion Cost-Recovery Difference $822,000 $542,000 $280,000 750,000 497,000 253,000 (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit

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